Concept
Volume Profile
Volume profile displays how much volume traded at each price level over a chosen period, drawn as a horizontal histogram. It answers where trading occurred, rather than when.
How to read it
- The point of control is the price with the greatest traded volume in the period — the histogram’s widest bar.
- The value area is the price band containing a chosen share of total volume, conventionally around 70%.
- Low-volume areas are prices where relatively little trading occurred during the period being measured.
What it does not tell you
- It describes where volume traded historically. Extending that into claims about how price will behave on return is an assumption, not something the profile shows.
- It depends entirely on the period selected. A profile over a week and one over a quarter can place the point of control at very different prices.
- Accuracy depends on the volume data source. Where volume is fragmented across venues or partially reported, the profile inherits those gaps.
Frequently asked questions
What is point of control in volume profile?
The price level at which the most volume traded during the measured period. It is a historical maximum, not a magnet.
What is the value area?
The price range containing a chosen proportion of the period’s volume, conventionally about 70%, centred on the point of control.
How is volume profile different from a volume bar chart?
Standard volume bars show how much traded in each time interval. Volume profile shows how much traded at each price, regardless of when.
Does price return to high volume areas?
It sometimes does, and that observation is widely discussed. A profile records where trading happened; treating it as determining future movement adds an assumption the data itself does not support.
Related
- VWAP (Volume Weighted Average Price) — Indicator
- Liquidity and the Bid-Ask Spread — Concept
- Support and Resistance — Concept
Educational use only
This page is educational material about how a technical tool is calculated and read. It is not investment advice, not a recommendation to buy or sell anything, and not a signal service. No indicator predicts future prices. CernoQuant is a trading journal and analytics platform, not a SEBI-registered investment adviser. Trading decisions and their outcomes are yours alone.
Indicators describe the market. A journal describes you.
Knowing how RSI is calculated is the easy part. The harder question is whether you actually followed your own rules — CernoQuant reads your executed trades and measures the gap between what you intended and what you did.
See your own patterns →